Iran nuclear deal
In July, the Iran nuclear deal was signed. Under this agreement, Iran will now export goods, including oil. This will have a mixed effect on the crude tanker industry. Over the years, Iran’s oil production and exports have decreased.
Oil production and export
Iran is currently exporting approximately 1 MMbpd (million barrels per day) of crude oil (DBO). This is half of the 2.2 million–2.3 MMbpd it exported in mid 2012—before export bans were imposed. The country’s oil production has increased for the last four months, and it produced 3.1 MMbpd in August 2015.
In an already oversupplied market, Iran says it can boost its exports by 1 MMbpd within six months. This will add to the total available supply of oil, which will put downward pressure on oil prices.
Part of this effect on oil prices has already been factored in by the market. Oil prices fell on prospect of increasing Iranian oil exports. In August 2015, the World Bank said that as Iranian oil will be exported next year, oil prices will fall by $10 per barrel. Lower oil prices encourage countries to stockpile oil, which increases the demand of crude tankers.
Iran had a minimum of 19 VLCCs (very large crude carriers) used for offshore storage. According to an August Platts report, out of the 19 VLCCs, four have left floating storage. Once all these tankers are back in action, the total marketable fleet will increase, which may push down VLCC rates.
Currently, China, India, Japan, and South Korea are the largest customers for Iranian oil. Since Iran is closer to Asian countries, countries such as China and India are expected to replace their crude oil imports from the Atlantic Basin with imports from Iran. Replacing a longer route with a shorter one will negatively impact the ton-mile demand and affect companies such as Teekay Tankers (TNK), Tsakos Energy Navigation (TNP), Nordic American Tankers (NAT), DHT Holdings (DHT), Frontline (FRO), and Euronav (EURN).